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Commodity Wrap - Gold, Oil, Cotton, Aluminium (02.11.2021)

12:08 2 November 2021

Gold

  • Precious metals with more industrial use - palladium and platinum - outperformed gold and silver over the previous couple of days

  • FOMC decision on Wednesday, 6:00 pm GMT is key for precious metals, especially gold

  • Improving macro data as well as accelerating inflation is likely to met with official taper announcement from the US central bank

  • Timing of taper launch as well as its size will be on watch

  • While taper decision has been expected for some time, Immediate decrease in the size of purchases may exert pressure on gold

  • US 10-year yield eased from 1.70 to around 1.55% over the past 2 weeks but gold failed to move higher

  • ETFs increased holdings of silver and palladium over the past week. Gold and platinum holdings decreased slightly

  • Gold pulled back below $1,800 mark but has managed to find support at the 50-session moving average

ETFs increased holdings of silver and palladium over the past week. Gold and platinum holdings decreased slightly. Source: Bloomberg

Gold dropped below $1,800 but found a support at the lower limit of the market geometry. Precious metal has climbed back into the upward channel later on and reached $1,790 area. Gold trades sideways this week as investors seem to be in a 'wait-and-see' mode ahead of FOMC meeting on Wednesday. Source: xStation5

Oil

  • Representatives of OPEC+ countries are set to meet this Thursday to announce output decision

  • Major economies like United States or Japan called on the oil producers to increase output in order to help stabilize energy markets

  • Kuwait does not see a need for OPEC+ to increase pace of monthly production increases

  • Should OPEC+ fail to provide world with more crude, United States may be forced to tap into strategic reserves

  • OPEC countries (not OPEC+) boosted output in October by around a half of what was agreed as Angola and Nigeria struggled to deliver production hikes

  • Russia has reportedly increase output by more than agreed on in October

  • Gas stations in China began to ration diesel amid insufficient supply

  • US oil inventories increased slightly last week but continue to hover near a 5-year lower for the current period.

  • BP said that oil demand recovered above 100 million barrels per day

US oil inventories increased slightly last week but continue to hover near a 5-year lower for the current period. Source: Bloomberg

WTI (OIL.WTI) failed to fully recover from a recent drop as the market resumed slide today. Price dropped to $83.00, a zone that saw some price reactions last night. Nevertheless, key support to watch is marked with 100-period EMA (red line, H4 interval) as this moving average halted sell-offs on the final days of October. Source: xStation5

Cotton

  • Cotton prices reached 10-year highs near $120 per pound

  • Cotton Association of India said that Indian cotton exports are expected to drop 38% in the 2021/22 season on the back of lower production in the country and higher domestic demand

  • Cotton harvest in some US states is expected to face delays on the back on increased rainfall this week

  • Abundant rainfall in Florida, Alabama and Georgia last week may have hurt crop quality

  • The International Cotton Advisory Committee forecasts that global cotton production may increase 6% this season, to 25.71 million tonnes. Committee noted that production in West Africa is set for a massive 48% YoY jump

  • The International Cotton Advisory Committee also expects a 1.6% increase in global demand, to 26 million tonnes

Cotton rallied to a 10-year high near $120.00 per pound. Agricultural commodity jumped above the upper limit of a steep upward channel this week. Weaker outlook for US and Indian crop is providing fuel for a cotton price rally. The nearest resistance to watch can be found in the $123.70 area, where the exterior 161.8% retracement of the 2018-2020 drop can be found. Source: xStation5

Aluminium

  • Aluminium dropped 15% off a recent 13-year high

  • Prices of industrial metals are pressured Chinese risks like energy crisis of deleveraging of real estate sector

  • Official manufacturing PMI from China dropped from 49.6 to 49.2 (exp. 49.8). This was the second straight month when Chinese manufacturing sector gauge sat in 'contraction territory' (sub-50 reading)

  • Companies in energy-intensive industries, like aluminium smelters, from Chinese Shanxi and Guizhou provinces are required to ration output during the winter season

  • United States agreed to remove tariffs on the European steel and aluminium in an attempt to lower costs and ease supply bottlenecks

  • Futures markets see prices easing into next year and beyond

Aluminium, just like other industrial metals, declined recently. Price of the base metal dropped around 15% off its recent 13-year high. Concerns over Chinese economic growth as well as removal of US tariffs on EU metals are helping to bring prices down. Price is slowly approaching the 2,600 area, where previous price reactions as well as the upward trendline can be found. Source: xStation5

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